Venezuelans’ Quality of Life Improved in UN Index Under Chavez

March 7 (Bloomberg) -- Venezuelans’ quality of life
improved at the third-fastest pace worldwide and income
inequality narrowed during the presidency of Hugo Chavez, who
tapped the world’s biggest oil reserves to aid the poor.

Venezuela moved up seven spots to 73 out of 187 countries
in the United Nation’s index of human development from 2006 to
2011, a period that covers the latter half of Chavez’s rule,
which ended with his death March 5. That progress trails only
Cuba and Hong Kong in the index, which is based on life
expectancy, health and education levels.

The improvements financed by his government’s oil profits
will aid Vice President Nicolas Maduro’s bid to succeed him. Yet
rising crime and inflation, crumbling infrastructure, oil output
that dropped 13 percent since 1999 and food and power shortages
may derail economic growth and undermine support for Chavez’s
policies in the longer term, said David Smilde, a sociologist at
the University of Georgia in Athens who lives in Venezuela.

“He gave a third of the population a sense that they
mattered, the material benefits they got are part of his
legacy,” said Julia Sweig, a senior fellow at the Council on
Foreign Relations, said by phone from outside San Francisco.
“But he destroyed the village in order to rebuild it, taking
property, spending oil money without reinvesting, mismanaging
the resources.”

Falling Poverty

Venezuela cut its poverty rate to 29.5 percent in 2011 from
48.6 percent in 2002, according to the United Nations Economic
Commission for Latin America, known as CEPAL. Venezuelans gave a
life satisfaction rating of 7.5 on a scale from 1-10, above the
global average of 5.5, according to a 2012 index of global
prosperity compiled by Legatum Institute, a London-based
research organization.

While nationalizing oil fields run by Irving, Texas-based
Exxon Mobil Corp. and Houston-based ConocoPhillips, Chavez
harnessed an oil windfall to increase spending and establish
social programs including subsidized food markets and primary
care health clinics in poor neighborhoods. Prices for Venezuelan
crude climbed to as high as $126.46 in July 2008 from $8.65 per
barrel when Chavez took office in 1999.

Isabel Rojas, a 72-year-old retired seamstress, was one
beneficiary of Chavez’s policies. Rojas said she was given free
housing in the Valles del Tuy neighborhood southwest of Caracas
after the apartment she lived in was deemed in risk of collapse.
After retiring in 1986, she said she began receiving a 2000
bolivar ($318) per month pension for the first time in 1999
after Chavez took power.

‘Valued the Poor’

Rojas said in an interview that she was impressed as much
by Chavez’s words as his deeds.

“He valued the poor just as much as the rich,” she said.
“Everyone had the same value.”

Venezuela has the lowest rate of income inequality – the
smallest gap between the rich and the poor – of all countries in
Latin America and the Caribbean, according to a March 5 report
by UN-HABITAT, the United Nations Human Settlements Program.

The report, called “The State of Cities in Latin America
and the Caribbean 2012,” uses the so-called Gini coefficient to
measure inequality. It said Venezuela has the region’s lowest
figure of 0.41, followed by Uruguay, and that the index has
fallen “significantly” since 1990. The coefficient rates
countries on a scale of zero to 1.0, with a higher number
indicating greater inequality.

At the same time, Chavez’s spending and policies that
included the seizure of more than 1,000 companies or their
assets, price controls and currency restrictions have undermined
the country’s long-term economic foundation, said Smilde.
Consumer prices rose 22.2 percent in January from a year
earlier, according to government data. They grew about 24
percent in February from a year earlier, the fastest official
rate in Latin America, according to a Bloomberg survey of six
economists.

Unsustainable Policies

“Chavez did improve people’s lives economically,” said
Smilde. “He didn’t necessarily improve people’s economic future
because a lot of the things he did aren’t sustainable.”

Chavez’s detractors also blame his government for a rise in
crime and a deterioration in governability.

Homicides rose 23 percent in 2012 to 16,030 from 13,080 in
2010, according to a report Maduro presented to the National
Assembly Feb. 28. The Venezuelan Violence Observatory, a non-governmental organization, puts the number higher, estimating
21,692 people, or 59 people a day, were murdered in 2012. The
murder rate of 73 per 100,000 inhabitants is the highest in
South America. In the U.S., the murder rate was five per 100,000
in 2009.

‘We Went Backward’

Carlos Nieto, a 41-year-old builder from Caracas blamed
Chavez for a 50 percent increase in prices in shops after the
government announced a 32 percent devaluation of the bolivar in
February. While he sometimes visits subsidized food markets, he
said the diversity of products is poor.

“I think we went backward” under Chavez, Nieto said,
blaming inflation, corruption and currency controls for a lower
standard of living.

Chavez’s successor will also struggle to rein in poverty
levels that began increasing in 2010, according to CEPAL. Even
with improvements under Chavez, Venezuela has the fifth-highest
percentage of poor people out of 12 countries measured in Latin
America, according to CEPAL.

“The Chavez government did very little to improve the
capacity for wealth creation,” said Francisco Rodriguez, a
senior economist at Bank of America Corp. in New York. “While
the pie was being distributed more fairly, the pie was not
growing.”